The vice president of SAP has made the shock announcement that the company is looking into offering a software-as-a-service (SaaS) product line.

John Wookey told delegates at the OnDemand Europe event that SAP is planning to offer the services to its biggest clients. The company had tried a small business SaaS offering last year, but the product generated little interest.

"On-demand is the next stage in applications development. It is important to hear SAP say that the future of the company is tied to successfully developing and marketing on-demand. SAP believes in on-demand and so does the SAP board," he said.

The plan seems to be that SAP will still continue selling its core product to enterprises, but that additional modules will be added using the SaaS model. Wookey said the first products would be out in the third quarter of the year, with expense management applications due next year.

The move is a major turnaround for the company, but one that has been welcomed by users.

"There has been a lot of talk recently about SaaS, but there aren't many large enterprises that would move their core business processes to the cloud. They'd be worried about security and, most importantly, reliability," said Alan Bowling, chairman of the SAP UK and Ireland User Group.

"This move from SAP is welcome as it allows companies to keep their in-house SAP systems for core processes, while taking advantage of some of the benefits of SaaS."

SAP may have made the decision to move to a SaaS model following falling profits and increased competition. However, the company must tread a fine line between protecting its core business and offering new services that will appeal to new customers.